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The Long Tail
Chris Anderson writes "I'm the editor of Wired Magazine and if you'll forgive the autohornblowing, I think you'll be interested in my piece in our latest issue. It argues, with a lot of new data, that the entertainment industry is shifting from an era of hit-driven economics to one of niche-driven economics. Content that was once relegated to the fringe, beneath the threshold of commercial viability, is now increasingly able to find a market in distributed audiences, marking a shift towards the previously-neglected Long Tail of the demand curve."
Two quick comments, and I'm not quite sure what to do with them:
... but the price is negligable compared to a 10,000sqft warehouse to store a million standard CDs.
1) The entire point the article is trying to make, and thus avoids making, is that electronic commerse violates one of the most sacred foundations of economics: scarcity. This whole online vs. retail distribution model does nothing to explain the fundamental difference between the internet and brick&mortar, which is *there is no physical inventory to worry about on the internet*. At least, not at the scales we're talking about. Sure, it costs something to store a million songs digitally in eighteen different incompatible formats
The bottom line is that the online model of distribution has lowered the break-even point of multimedia to the creation phase. Books, Music, Movies all become the same as signals on a wire that can be plugged in anywhere in civilization. Once the initial cost of production and advertising has been recouped, there's a *minimal* cost to distribution online that scares economists and retailers alike. You don't have to worry about stock, about shipping, or about inventory management. Thus, a twenty thousand dollar movie like Clerks or Blair Witch can easily become a hit -- because it takes much less effort to make more profit than a hundred-million dollar blockbuster!
2) When mentioning the MP3.com lawsuits, the article fails to mention the paradox of it's greatest innovation and fatal flaw. The reason MP3.com became so huge and the reason it got sued was because of a service that allowed you to put your CD in your PC at home, scan it for authenticity, then be able to access those songs from anywhere. The downside was, these songs were all in one database, created by MP3.com, and stored by MP3.com. The laws that say you can make a backup copy clearly (or not) state that only *you* are authorized to access *your* backups. Just because you own a CD doesn't entitle you to access MP3.com's digital copy. It's a rediculous semantic issue, and even further befuddles the issue of rights management. Ie. When I buy a CD, what am I getting? If I'm getting a physical piece of plastic, then I can do whatever I want with it. If I'm getting a license to listen to those songs, then I should be allowed to have access to those songs in whatever format I choose, and a replacement CD in the case of distaster should only cost the price of the round plastic and shipping.
These issues will be ironed out, not by courts, but by the people who want their music. They're already speaking with their wallets, and that's what scares institutions like the RIAA. It's not because people want to steal all the music (some do, but they make us look bad).
It's because the people, the consumers, want a free market to decide the cost of their entertainment. Artifical Scarcity in the form of big movie theaters, Book stores, CD stores, and DVD rental outlets are going to suffer due to the changing economics of the internet. It's not hype, and it's not loved by everyone, but it's the future.
It's why I can put a Wassily Kandinsky painting on my wall for $9.99. Not because I don't appreciate the art or think that the artist doesn't deserve to get paid. It's because technology has provided the ability to reproduce art at such a high level of quality. Now I can be one of a million people to buy that $9.99 poster and still appreciate fine art.